Controversy has swirled around digital media-focused venture capital firm Velocity Interactive Group from its beginnings last year. Now, more details about the Silicon Valley-Los Angeles firm’s saga are being reported by PEHub.
The tale of Velocity shows how unnerving change is hitting the digital media investing market. Astronomic valuations for companies like Facebook have led to many other digital media companies raising their own valuations, as PEHub’s Dan Primack describes — throwing Velocity’s original investment plans out the window.
Velocity’s story also shows how venture capital can be a cold-blooded sport. Partner Roland Van Der Meer (top left) made a surprisingly ruthless move in December to cut off his partners (at his former firm, ComVentures) at the knees, telling them to clear out their desks on the morning of a limited partners meeting where a new firm would be announced — and this, even after Van Der Meer worked with at least one of them, Michael Rolnick (bottom in image), for nine years.
Read the story yourself, because it provides insight into the sort of mentality you may sometimes have to deal with if you get involved with venture firms. I found myself in the middle of the saga at one point when I had a surreal phone call with Rolnick as it was all unfolding. As he drove in his car a couple of weeks before the December meeting, Rolnick was telling me that a partnership with a new partner, Ross Levinsohn (middle in image above, and the former News Corp. exec who had helped acquire MySpace and was now trying to form a fund to rollup media properties) was set in stone. I knew something was up when I called Levinsohn a few minutes later to confirm, and he denied anything of the sort. Things would twist and turn over ensuing weeks, and Levinsohn did agree to work with ComVentures (but with Van Der Meer, leaving out Rolnick; read Dan Primack’s story to follow it all). It was clear things were headed for trouble.
I think Primack makes the right conclusions. The Valley’s entrepreneurs have become suspicious of Van Der Meer over the last few years, as he continues to make moves that show he is difficult to trust personally (we’ve covered these events on several occasions). Van Der Meer’s response has always been that he is just doing what good business requires, and that decisiveness, even if hurts people, is part of doing business in Silicon Valley. Fair enough, then, as long as you know his approach going into a relationship: You could get thrown on the street if you don’t perform.
At the same time, though, there’s a sense that Levinsohn and his partner Miller have the skill and contacts it takes to make a good investment team but that they may not have appreciated the depth of suspicion in the valley about Van Der Meer. Now, as the firm tries to raise the money it will need to invest media properties, the LPs are asking the same questions. This will be interesting to watch.
Coincidentally, we made several calls to Levinsohn yesterday about an unrelated matter, none of which were returned. We hope to get an update today.
Update: See comment below, which concerns Jeb Miller, another ComVentures partner cut off by Van Der Meer. I’ve never met Miller, and forgot, or was never aware of, his move to ComVentures from WorldView. I haven’t confirmed, nor do I endorse, the contents of the comment below, but it is true that WorldView is another firm that has had personal problems in its ranks (see my coverage here).
The company says it has signed exclusive agreements with the nation’s six largest mall owners (known as REITs, for Real Estate Investment Trusts), which the company says gives it access to more than 80 percent of the malls in plum geographic areas. It has got 165 installations, and will be profitable this year, said Reactrix chief financial officer, Peter Bardwick. The company has now raised $68 million since 2001.